HOUSTON - From the storied King Ranch near the Mexican border to the 1901 Spindletop well in East Texas - the most famous gusher of all time - oil companies are returning to their old stamping grounds in search of the next big find.
All over East Texas, producers such as Anadarko Petroleum and EOG Resources are flocking back to areas that helped fuel America’s rise as a superpower after World War II. They’re applying new techniques to layers of rock stacked like playing cards underground that oil companies have drilled for decades. And, as fields from Louisiana to North Dakota are starting to show signs of fatigue, drillers are targeting areas that have long gone overlooked or barely tapped.
“I never thought I’d go back to East Texas,” said Mark Plummer, a third-generation oilman who grew up hearing stories about his grandfather’s days in the oil patch “living the roughneck dream.” Those fields were thought to be long played out by the time Plummer arrived in 2000 with his own company, Chestnut Exploration & Production. The basin was “dead as a doornail,” he said. Now he’s betting his East Texas play will be his “Jed Clampett moment,” referring to the television character who struck it rich in the 1960s sitcom The Beverly Hillbillies.
East Texas’ oil and gas prospects are springing to life again. Plummer’s closely held production company just drilled a successful natural-gas well in Rusk, Texas, and is preparing to drill horizontally for oil near the same formation that helped build H.L. Hunt’s energy empire in the 1930s. He plans to drill another three dozen wells over the more than 10,000 acres he’s leased 150 miles north of Houston. “Now, it’s a hot area,” he said. “East Texas is a great place to play.”
Horizontal drilling and hydraulic fracturing, which cracks rocks to release oil and gas, are allowing the industry a fresh start in old hot spots, said Jordan Marye, a managing director for oil and gas at Denham Capital Management, which has invested in East Texas. “What we’ve been able to do is essentially have another full pass at these same resources.”
Oil companies are racing to establish new fields capable of sustaining a drilling campaign that has upended world markets and pushed the U.S. past Saudi Arabia and Russia last year as the world’s top producer of oil and natural gas. Fueling the renewed search is a fear that shale wells are petering out too quickly, raising the stakes for a new find to replace rapidly declining production in some areas.North Dakota, one of two states at the heart of the U.S. oil renaissance, saw the sharpest output decline in the state’s history in December.
Not everyone is sure there is another big oil find out there. In 2011, former Chesapeake Energy founder Aubrey McClendon said all of the largest untapped U.S. fields have been discovered. So far, about 80 percent of the growth has come from just two areas: North Dakota’s Bakken shale and South Texas’ Eagle Ford formations.
Last year saw the slowest rate of oil production growth, at 40 percent, in those two areas since the onset of the boom. That compares to 2011 when oil production nearly doubled in the fields.
Some producers have touted Ohio’s Utica or the Tuscaloosa Marine shale in Louisiana as the fields most likely to see a flurry of development next. Others have focused instead on wringing more out of every well.
As the industry moves to dispel fears of falling prices or wells that fizzle too quickly, many have begun to look to well-worn regions of East Texas.
The prolific Frio sands, the rock layer that gave birth to much of Texas’ booming production from 1930 to the 1980s, runs from the King Ranch south of Corpus Christi up along the Gulf Coast to Spindletop. The East Texas field mostly bought and developed by Hunt, who was among the world’s richest men in the 1950s, allowed his company to exceed all of German output with its oil sales to the Allies in World War II.
“If you’re going to find it, you have to go back to where you were before,” said Reed Van Valin, vice president of operations for Geomap Company, which tracks and maps the development of drilling across the U.S. “A lot of these lessons were all learned in the old conventional days. They’re just reapplying it now.”
Business, Pages 27 on 03/21/2014